OTTAWA — Canada’s auditor general has found that the billions of dollars set aside for the federal government’s shipbuilding plan won’t be enough to get the navy the vessels it was promised, or needs.

Auditor General Michael Ferguson’s report on the national shipbuilding procurement strategy won’t be released until Nov. 26, but several sources who have seen versions of the report have told Postmedia News that it shows the current plan is untenable.

The report has the potential to put the Conservative government in a significant bind and undermine the government’s boast that the $38-billion shipbuilding plan is an unmitigated success story.

In particular, the government will be warned that it must either increase the amount of money it is willing to spend on the new ships, or scale the projects back — which in some cases would render them pale imitations of what was originally envisaged.

Some will point to the auditor general’s report as further proof of incompetence within the Department of National Defence, especially after the controversy that has swirled around the F-35 stealth fighter project in recent years.

In fact, some military officials have indicated concern that the auditor general’s report could cause a reaction on a par with Ferguson’s April 2012 report on the F-35, which became a political lightning rod for the government and severely damaged the defence department’s reputation.

But the auditor general is expected to finger a flawed procurement process and politics as the main issues this time around.

The report will note the government took what were supposed to be initial estimates for new frigates, destroyers and resupply ships and locked them in as the actual project budgets.

This was before any real design work had started, and before the government rolled the projects all into one industrial plan aimed at turning Canada into a world-class shipbuilder, all of which has rendered those initial estimates obsolete.

The auditor general’s findings will come as no surprise to many analysts and experts who have studied or otherwise been following the shipbuilding plan over the years, and have been warning of just such a problem.

But the government has until this point shown little if any flexibility, and instead told officials to make do with what they’ve been given.

Defence officials already admitted in February that they have reduced how fast the navy’s yet-to-be-built armed Arctic vessels can sail to keep the project within its $3.1-billion budget, and warned about other potential “trade-offs.”

Exactly how the government will respond to the auditor general’s report is unclear, but the shipbuilding strategy’s success or failure has wide implications.

It is vital for the navy and the coast guard, both of which operate fleets of destroyers, icebreakers, frigates and other vessels that are nearing the end of their lifespans and must be replaced.

It is huge for Halifax and Vancouver, which were selected in October 2011 as the main production centres and are expecting to see hundreds of jobs created.

And it is important to the Conservative government’s reputation as both strong fiscal managers and supporters of Canada’s military.

That reputation has taken a knock in recent years following problems with the F-35 stealth fighter, search-and-rescue aircraft and other military procurement projects.

While it will likely face criticism from some corners for doing so, the possibility that the government will invest more money into the shipbuilding strategy can’t be ruled out.

Last week, the coast guard revealed that its new icebreaker will cost $1.3 billion to build — nearly double the $720 million originally estimated when the project was first announced in 2007.

A coast guard spokeswoman said the original figure was based on old estimates and the budget was revised upward following a more comprehensive assessment, and to ensure the icebreaker Diefenbaker was able to perform the tasks required of it when it comes hits the water.

(Ferguson’s report only examines the Royal Canadian Navy projects that fall within the $38-billion national shipbuilding procurement strategy and does not address the coast guard part, though the findings will likely have relevance there as well.)

National Defence also said that while it expects to spend about $26.2 billion on 15 new frigates and destroyers over the next decade, the project “is in the very early days” and the number is a “preliminary acquisition cost estimate, for planning purposes.”

While he hasn’t seen the report, defence analyst David Perry of the Conference of Defence Associations Institute said the issues raised by the auditor general are serious and need to change, not just in shipbuilding but all procurement projects.

“The process we have now forces people to come up with preliminary estimates to get a project moving, which is understandable because you don’t want to cut a blank cheque and say ‘Go buy a navy,’” he said. “But at the same time those things get locked in before you can get any kind of detail and there’s no recourse.”